A project has the following cash flows:

Project Cash Flows | |

Time (yrs) | Cash flow ($) |

0 | -400 |

1 | 200 |

2 | 250 |

What is the Profitability Index (PI) of the project? Assume that the cash flows shown in the table are paid all at once at the given point in time. The required return is **10**% pa, given as an effective annual rate.

You just started work at your new job which pays $48,000 per year.

The human resources department have given you the option of being paid at the end of every week or every month.

Assume that there are 4 weeks per month, 12 months per year and 48 weeks per year.

Bank interest rates are 12% pa given as an APR compounding per month.

What is the dollar gain over one year, as a net present value, of being paid every week rather than every month?

A moped is a bicycle with pedals and a little motor that can be switched on to assist the rider. Mopeds offer the rider:

Which of the following companies is most suitable for valuation using PE multiples techniques?

A young lady is trying to decide if she should attend university. Her friends say that she should go to university because she is more likely to meet a clever young man than if she begins full time work straight away.

What's the correct way to classify this item from a capital budgeting perspective when trying to find the Net Present Value of going to university rather than working?

The opportunity to meet a desirable future spouse should be classified as:

**Question 538** bond pricing, income and capital returns, no explanation

Risk-free government bonds that have coupon rates greater than their yields:

**Question 576** inflation, real and nominal returns and cash flows

What is the present value of a **nominal** payment of $1,000 in 4 years? The **nominal** discount rate is 8% pa and the inflation rate is 2% pa.

A stock is expected to pay a dividend of $**5** per share in **1** month and $**5** again in **7** months.

The stock price is $**100**, and the risk-free rate of interest is **10**% per annum with continuous compounding. The yield curve is flat. Assume that investors are risk-neutral.

An investor has just taken a **short** position in a **one** year forward contract on the stock.

Find the forward price ##(F_1)## and value of the contract ##(V_0)## initially. Also find the value of the short futures contract in 6 months ##(V_\text{0.5, SF})## if the stock price fell to $**90**.

You intend to use futures on oil to hedge the risk of purchasing oil. There is no cross-hedging risk. Oil pays no dividends but it’s costly to store. Which of the following statements about basis risk in this scenario is **NOT** correct?

**Question 981** margin loan, Basel accord, credit conversion factor

Margin loans secured by listed stock have a Basel III risk weight of **20**%.

For margin loans that cannot be immediately cancelled by banks and asked to be repaid, the credit conversion factor (CCF) is **20%**.

Suppose you have a stock portfolio worth $500,000, financed by:

- $
**300,000**of your own money; and - $
**200,000**of the bank’s funds in the form of a margin loan which can only be cancelled by the bank after 5 days notice. The margin loan’s maximum LVR is**70**%.

How much regulatory capital must the bank hold due to your margin loan? Assume that the bank wishes to pay dividends to its shareholders, so include the 2.5% capital conservation buffer in your calculations.